New Fees Replace Excessive Bank Overdraft Fees

New York, NYAlthough regulators have pushed through legislation to protect consumers from excessive bank overdraft fees, this has not stopped banks from attempting to recover profits through other fees. Meanwhile, smaller banks may also be under fire for excessive bank fees.


One of the first new fees to be brought in, according to the Wall Street Journal on 6/19/10, will be on previously free checking accounts. Although free checking has long been a cornerstone of banking, many consumers will now see charges on their checking accounts.

Other fees may be applied for fraud alerts, distributing debit cards and credit reports. Some banks may even charge consumers if they do not make a certain number of transactions per month. Customers may find they are charged monthly—or quarterly—account maintenance fees.

The Wall Street Journalnotes that HSBC will start charging up to $15 a month for checking accounts that were previously free, while Wells Fargo is eliminating its free checking accounts as of July 1.

Under new regulations, banks must obtain new customers' permission before overdraft fees can be charged on debit card and ATM transactions starting July 1. By August 15, that legislation will extend to existing customers as well. With some banks charging up to $35 for an overdraft fee—even on a $2 cup of coffee—banks could lose a lot of money, which is where the new fees come in. A 6/25/10 article in USA Today notes that overdraft and insufficient funds fees brought in approximately $40 billion for banks in 2009.

In addition to allegations of excessive fees, some banks have been accused of reordering transactions to push consumers into overdraft more quickly, triggering even more overdraft transactions. They are also accused of deducting the amount of a purchase when the purchase is made rather than when it clears.

Although much of the focus to date has been on large banks, such as Wells Fargo and Bank of America, smaller, regional or local banks may also have charged excessive overdraft fees. They could also change their fee system to end free checking.

According to the 6/30/10 edition of the Associated Press, community and mid-sized banks are more reliant than big banks on fees to generate revenue. The article notes that TCF Financial Corp., a bank based in Minnesota, received 26 percent of its revenue from fees and has now added monthly maintenance fees of $9.95 to customers' accounts. Customers who meet certain requirements are exempted from the fees.

The bottom line is that customers with accounts at regional banks should read all literature received from their bank to avoid potential surprises on their next bank statement.